Tips for Cutting Costs in Your Auto Dealership this Year

Looking at ways to cut costs is always a wise move for entrepreneurs, but after dealing with the economic impact of the COVID-19 pandemic, most business owners have tighter cashflow than ever and need to find ways to trim expenses.

This fact is certainly true for many car dealerships. They’re feeling the heat in most states as lockdown orders have kept people at home, off the roads, and in many cases putting off plans to buy a new vehicle for themselves or their workplace. If you’re struggling to stay afloat or want to find ways to bring in more profits during this time, there are a few steps you can take to cut costs.

Track Expenses

It’s essential to track your expenses closely so you can understand where you spend money. Doing this task makes it, in turn, much easier to work out where you might be able to trim expenditure.

Keep an eye on both your variable expenses, such as inventory, delivery charges, and advertising, as well as fixed costs, like insurance, premise lease or mortgage fees, phone and internet costs, and employee wages.

Analyze costs for each category and evaluate why money was spent and if it was necessary. You’ll likely find areas where you’re spending more than you think you should, and where you might be able to negotiate better deals or cut out expenses completely.

Better Manage Inventory

One of the biggest costs for dealerships annually is, of course, vehicle and part inventory. As such, this is an area in which you can save considerable money if you make some changes. For example, start by making sure you’re clear on exactly what stock you have and know where it’s located.

Use some of the excellent dealership inventory management tools on offer. They reduce the time you and your team have to spend on tracking vehicles and parts and make it easier to see what items you’ve held for too long and which things you should stock in greater numbers.

In turn, your staff won’t be so tied up with paperwork, and you won’t have stock sitting gathering dust for so long. Plus, it reduces the risk of items, particularly vehicle parts, going missing. This all saves you money.

Reduce Employee Overtime Costs

Another factor to consider is personnel expenses. You likely won’t want to let go of any of your staff, unless there’s someone who isn’t performing, but you can cut costs by watching how much money you spend on employee overtime.

Ensure you or a manager sign off on all overtime before it goes to payroll, and encourage your team to stick to their standard hours. Also, if you do need to hire anyone new, be smart about who you choose. It’s expensive advertising roles, replacing staff, and training new members, so try to find the right fit for roles the first time, and minimize turnover rates. Positive decisions here can add up to substantial savings.

Examine Shipping Costs

Dealerships pay out significant money annually on shipping vehicles and parts. In particular, a major cost in the budget can be overnight shipping, when customers want vehicles urgently, or repairs completed ASAP. While you want to keep your valued clients happy, you also need to consider how much extra you have to factor in for expensive transport costs.

Wherever possible, minimize overnight shipping and choose less expensive, standard delivery methods. Also, analyze postage, courier, and other transport statements monthly to ensure you’re not paying for incorrect parcels that weren’t yours or team member deliveries they tried to sneak onto your account.

Focus on Effective Marketing

Most dealerships can cut costs by spending their marketing dollars more strategically, too. While advertising is essential, don’t keep throwing money away on campaigns that don’t bring in enough of a return on investment.

Analyze how much you get back from each commercial, print ad, pay-per-click ad, or other strategies. Continue only those that work effectively. Test and measure and keep tweaking your ads and social media posts, etc. to get the highest ROI possible.

Also, if you and your team focus on providing excellent customer service at all touchpoints during a person’s dealings with your business, you should receive more repeat business over the years. When people feel taken care of, they’re more likely to refer other customers to you. The more sales you get from current or referred clients, the less money you’ll need to spend on marketing.

Running a dealership is expensive, and it can be hard to make a profit. As such, following the strategies listed above can assist you to cut costs now and into the future, and help your business to survive economic downturns.